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Boys & Girls Clubs of Central New Mexico

Combined Financial Statements and Independent Auditors’ Report

December 31, 2017 and 2016

Boys & Girls Clubs of Central New Mexico Table of Contents

Page

Independent Auditors’ Report 1-2

Financial Statements

Combined Statements of Financial Position 3

Combined Statements of Activities 4-5

Combined Statements of Functional Expenses 6-7

Combined Statements of Cash Flows 8-9

Notes to Financial Statements 10-27

Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 28-29

Schedule of Findings 30

(505) 293-5009 • Fax (505) 293-3597 • 4811 Hardware Drive NE, Suite E-4 • Albuquerque, New Mexico 87109 www.loftisgroup.net

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Independent Auditors’ Report

Board of Directors Boys & Girls Clubs of Central New Mexico Report on the Financial Statements We have audited the accompanying combined financial statements of the Boys & Girls Clubs of Central New Mexico (the “Club”) (a nonprofit organization), which comprise the combined statements of financial position as of December 31, 2017 and 2016, and the related combined statements of activities, functional expenses, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial statements contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the combined financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements.

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Club as of December 31, 2017 and 2016, and the changes in its net assets and it cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have issued our report dated May 29, 2018, on our consideration of the Club’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed on accordance with Government Auditing Standards in considering the Club’s internal control over financial reporting and compliance.

Albuquerque, New Mexico May 29, 2018

Financial Statements

The accompanying notes are an integral part of these financial statements. 3

Boys & Girls Clubs of Central New Mexico Combined Statements of Financial Position

December 31,

Assets 2017 2016Current assets

Cash and cash equivalents 8,658$ 55,417$ Contracts and other receivables, net 179,659 121,920 Prepaid expense 4,869 21,862

Total current assets 193,186 199,199 Investments - endowment trust 1,282,704 1,157,220 Endowment fund 153,239 142,816 Property, furniture and equipment, net 916,788 899,189

Total assets 2,545,917$ 2,398,424$

Liabilities and Net AssetsCurrent liabilities

Accounts payable 148,225$ 81,926$ Accrued liabilities 34,092 34,147 Notes payable - current portion 24,332 20,485 Line of credit 565,564 434,400

Total current liabilities 772,213 570,958 Amounts held for others 12,496 14,928 Notes payable - less current portion 95,589 36,493

Total liabilities 880,298 622,379

Net assetsUnrestricted

Undesignated (deficit) (5,294) 297,683 Designated - endowment trust 1,282,704 1,157,220

Total unrestricted net assets 1,277,410 1,454,903 Temporarily restricted 229,675 162,608 Permanently restricted 158,534 158,534

Total net assets 1,665,619 1,776,045 Total liabilities and net assets 2,545,917$ 2,398,424$


Boys & Girls Clubs of Central New Mexico Combined Statement of Activities

For the Year Ended December 31, 2017

Temporarily PermanentlyUnrestricted Restricted Restricted Total

Support and RevenueContributions and grants 683,083$ 152,983$ -$ 836,066$ Program service fees 424,648 - - 424,648 Special events, net of expenses

of $284,977 374,694 15,000 - 389,694 Endowment income 183,344 - - 183,344 Summer food service meals 60,255 - - 60,255 In-kind contributions 58,128 - - 58,128 Other 28,863 - - 28,863 Membership dues 22,280 - - 22,280 Trust 1,042 - - 1,042 Net assets released from restriction 100,916 (100,916) - -

Total support and revenue 1,937,253 67,067 - 2,004,320

ExpensesProgram services 1,719,676 - - 1,719,676 Support services

Management and general 172,848 - - 172,848 Fundraising 222,222 - - 222,222 Total expenses 2,114,746 - - 2,114,746

Change in net assets (177,493) 67,067 - (110,426) Net assets, beginning of year 1,454,903 162,608 158,534 1,776,045 Net assets, end of year 1,277,410$ 229,675$ 158,534$ 1,665,619$


Boys & Girls Clubs of Central New Mexico Combined Statement of Activities


Temporarily PermanentlyUnrestricted Restricted Restricted Total

Support and RevenueContributions and grants 653,852$ 138,336$ -$ 792,188$ Program service fees 401,812 - - 401,812 Special events, net of expenses

of $264,943 268,263 - - 268,263 Endowment income 179,805 - - 179,805 Summer food service meals 43,521 - - 43,521 In-kind contributions 61,002 - - 61,002 Membership dues 24,609 - - 24,609 Other 13,134 - - 13,134 Trust 1,062 - - 1,062 Net assets released from restriction 46,035 (46,035) - -

Total support and revenue 1,693,095 92,301 - 1,785,396

ExpensesProgram services 1,595,774 - - 1,595,774 Support services

Management and general 89,323 - - 89,323 Fundraising 38,635 - - 38,635

Total expenses 1,723,732 - - 1,723,732

Change in net assets (30,637) 92,301 - 61,664 Net assets, beginning of year 1,485,540 70,307 158,534 1,714,381 Net assets, end of year 1,454,903$ 162,608$ 158,534$ 1,776,045$


Boys & Girls Clubs of Central New Mexico Combined Statement of Functional Expenses


` ManagementProgram and Fund-Services General raising Total

Salaries 1,008,612$ 95,972$ 89,333$ 1,193,917$ Occupancy 104,399 10,090 12,083 126,572 Professional fees 45,180 26,841 52,981 125,002 Payroll taxes 85,360 9,725 12,965 108,050 Depreciation 81,517 4,109 4,109 89,735 Program 75,178 - - 75,178 Miscellaneous 41,096 4,109 15,737 60,942 Summer food service meals 54,335 - - 54,335 Employee benefits 30,274 6,491 7,460 44,225 Supplies 37,991 1,452 1,935 41,378 Scholarships 35,716 - - 35,716 Bad debt 24,228 - 8,907 33,135 Travel 10,937 6,842 6,842 24,621 Interest 19,192 2,186 2,916 24,294 Marketing 17,563 1,865 2,736 22,164 Vehicle 15,292 - - 15,292 National dues 12,057 1,374 1,831 15,262 Rent 9,413 1,073 1,430 11,916 Loss on sale of fixed assets 5,033 - - 5,033 Board 2,962 338 450 3,750 Postage 3,341 381 507 4,229

Total expenses 1,719,676$ 172,848$ 222,222$ 2,114,746$


Boys & Girls Clubs of Central New Mexico Combined Statement of Functional Expenses


` ManagementProgram and Fund-Services General raising Total

Salaries 839,321$ 71,278$ 29,699$ 940,298$ Occupancy 103,766 620 259 104,645 Professional fees 59,418 4,874 2,031 66,323 Payroll taxes 83,745 2,558 1,066 87,369 Depreciation 96,312 30 12 96,354 Program 67,478 - - 67,478 Miscellaneous 43,132 1,632 679 45,443 Summer food service meals 41,055 - 1,384 42,439 Employee benefits 47,470 2,152 897 50,519 Supplies 46,074 372 155 46,601 Scholarships 45,368 - - 45,368 Bad debt 20,045 650 271 20,966 Travel 15,277 913 415 16,605 Interest 18,611 1,245 519 20,375 Marketing 20,599 1,191 496 22,286 Vehicle 14,084 4 1 14,089 National dues 11,212 562 234 12,008 Rent 10,451 725 302 11,478 Loss on sale of fixed assets 5,927 - - 5,927 Board 3,337 280 117 3,734 Postage 3,092 237 98 3,427 p

Total expenses 1,595,774$ 89,323$ 38,635$ 1,723,732$


Boys & Girls Clubs of Central New Mexico Combined Statements of Cash Flows

For the Years Ended December 31,

2017 2016 Cash flows from operating activities Cash received from contributions and grants 687,705$ 718,663$ Cash received from program service fees 388,932 356,444 Cash received from special events 674,671 350,138 Other cash receipts 52,185 38,805 Cash paid to employees and suppliers (2,025,770) (1,483,463) Interest paid (24,294) (20,375) Investment income 36,742 29,904

Net cash used by operating activities (209,829) (9,884)

Cash flows from investing activities Proceeds from the sale of investments 234,451 84,336 Insurance proceeds for roof repair 36,121 - Purchases of investments (180,601) (39,695) Purchases of property and equipment (121,008) (35,222)

Net cash provided (used) by investing activities (31,037) 9,419

Cash flows from financing activities Draws on line of credit 131,164 85,000 Acquistion of note payable 85,000 - Repayments on line of credit - (25,600) Principal payments on note payable (22,057) (19,490)

Net cash provided by financing activities 194,107 39,910

Net increase (decrease) in cash and cash equivalents (46,759) 39,445 Cash and cash equivalents, beginning of year 55,417 15,972

Cash and cash equivalents, end of year 8,658$ 55,417$


Boys & Girls Clubs of Central New Mexico Combined Statements of Cash Flows – continued

For the Years Ended December 31,

2017 2016 Reconciliation of change in net assets to net cash used by operating activities Change in net assets (110,426)$ 61,664$

Adjustments to reconcile change in net assets to net cash used by operating activities Depreciation 89,735 96,354 Donated services and equipment (27,480) (18,240) Bad debt 11,642 10,216 Net realized and unrealized gain on investments (127,834) (147,383) Gain on endowment fund (10,423) (5,105) Stock donations (51,500) (40,073) Loss on disposal of fixed assets 5,033 5,928 Changes in assets and liabilities

Contracts and other receivables (69,381) (15,212) Prepaid expense 16,993 4,894 Accounts payable 66,299 9,933 Accrued liabilities (55) 12,212 Amounts held for others (2,432) 14,928

Total adjustments (99,403) (71,548) Net cash used by operating activities (209,829)$ (9,884)$

In 2017 and 2016, the Club received donated services of $27,480 and $18,240 for their Schumann and Seligman locations, respectively. These donated services were for the Lowe’s renovation which was started in 2016 and completed in January 2017. Total construction in progress for this project was $0 and $35,670 at December 31, 2017 and 2016, respectively.

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Boys & Girls Clubs of Central New Mexico Notes to Financial Statements December 31, 2017 and 2016

1) Organization

The Boys & Girls Clubs of Central New Mexico (the “Club”) is a charitable nonprofit entity established to enable all young people, especially those who need us most, to reach their full potential as productive, responsible and caring citizens.

The Club operates two centers and four satellite locations in Albuquerque and Rio Rancho. Each center offers a wide variety of programs for youth ages 5-18. The overall program mix helps members reach all their priority outcomes: Academic success, good character and leadership and healthy lifestyles.

The Club was incorporated as a nonprofit entity under the provisions of the New Mexico Business Corporation Act in 1951.

The Club’s major sources of revenue are contributions and grants, special events, and program service fees.

2) Summary of Significant Accounting Policies

Basis of Accounting The financial statements of the Club have been prepared on the accrual basis of accounting and, accordingly reflect all significant receivables, payables, and other liabilities.

Basis of Presentation The Club is required to report information regarding its financial position and activities accordingly to three classes of net assets: unrestricted, temporarily restricted and permanently restricted. The Club recognizes its interest in the net assets of the Club’s Endowment Trust (the “Trust”), which is named the Albuquerque Boys Club Foundation (the “Foundation”). The purpose of the Foundation is to provide for the future financial needs of the Club. Accordingly, the Foundation’s financial activities are included in these combined financial statements.

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2) Summary of Significant Accounting Policies – continued

Principles of Combination The accompanying combined financial statements include the accounts of the Club and the Foundation. All material related party balances and transactions have been eliminated in combination. Cash and Cash Equivalents The Club considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Joint Costs Joint costs are costs related to fund-raising activities in which programs or administrative activities can be identified and allocated as such. For example, the costs of producing and mailing a newsletter that gives general program information, but also includes a fund raising appeal, would be considered joint costs. During 2017 and 2016, the Club did not incur any significant joint costs. Investments Investments in equity securities with readily determinable fair values and all investments in debt securities are measured at fair value in the combined financial statements. Investment income or loss (including gains and losses on investments, interest, and dividends) is included in the statements of activities as increases or decreases in unrestricted net assets unless the income or loss is restricted by donor or law. All investments are held and managed by the Foundation. Property, Furniture and Equipment Purchased property, furniture and equipment, is stated at cost. Property, furniture, and equipment that is received by donation is recorded at the estimated fair value on the date of donation. Such donations are reported as unrestricted support unless the donor has restricted the donated asset for a specific purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property are reported as restricted support.

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2) Summary of Significant Accounting Policies — continued

Property, Furniture and Equipment - continued Absent donor stipulations regarding how long donated assets must be maintained, the Club reports expiration of donor restrictions when the donated or acquired assets are placed in service as instructed by the donor. The Club reclassifies restricted net assets to unrestricted net assets at that time. Purchased or donated property in excess of $2,500 is capitalized. Depreciation is calculated on a straight-line basis in amounts sufficient to relate the cost of depreciable assets to operations over their estimated useful lives, which range from three to forty years. Depreciation expense in the amount of $89,735 and $96,354 was recorded for the years ended December 31, 2017 and 2016, respectively. Support The Club reports contributions of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets or specify the time period for which the assets may be expended. When a donor restriction expires, restricted net assets are reclassified to unrestricted net assets and reported in the combined statements of activities as net assets released from restriction. Donor restricted contributions whose restrictions are met in the same reporting period are reported as unrestricted. Donated Materials and Services Donated material and services are recognized as contributions if the services (a) create or enhance nonfinancial assets or (b) require specialized skills, are performed by people with those skills, and would otherwise be purchased by the Club. The Club received donated services of approximately $27,000 and $18,000 for repairs on their Schumann and Seligman locations for the years ended December 31, 2017 and 2016, respectively. Donated services are recorded at estimated fair value at date of donation. Functional Allocation of Expenses Expenses are charged directly to program and supporting services based on specific identification, when possible. Costs benefiting more than one service are allocated based on measures such as management’s estimates of time spent, square footage, etc.

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2) Summary of Significant Accounting Policies — continued

Income Taxes The Club is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code, and has been classified by the Internal Revenue Service as an organization that is not a private foundation. Currently, the Club engages in no activities that would be taxed as unrelated business income. Accordingly, no provision for income taxes has been reflected in the Club financial statements. The Club open audit periods are for the years ending December 31, 2014 and after. The Club adopted the provision of FASB ASC 740-10 “Accounting for Uncertainty in Income Taxes”. As a result of implementation, the Club has not recognized any changes to the financial statements for uncertain tax positions. Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported changes in net assets. Actual results could differ from those estimates. Fair Value of Financial Instruments The Club believes the carrying amount of cash and cash equivalents, receivables (net of allowances, if any), prepaid expense, accounts payable and accrued liabilities approximates fair value due to their short maturity. Subsequent Events Management has evaluated subsequent events through May 29, 2018, the date the financial statements were available to be issued.

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3) Contracts and Other Receivables

Contracts and other receivables consist of the following at December 31,:

2017 2016Contracts 92,001$ 85,017$ Program 67,850 47,979 Events 35,435 - Golf tournament pledges 18,936 20,930 Other 9,085 -

223,307$ 153,926 Less allowance for doubtful accounts (43,648) (32,006)

Total 179,659$ 121,920$

4) Investments – Endowment Trust

The Board of Directors of the Foundation typically consists of three members. Currently, there are two members, one of which is on the board of directors of the Club. The Trust agreement states that only the income from the Trust shall be provided to the Club. However, at the discretion of the trustees, additional Trust funds may be provided to the Club. The Trust assets have been classified as unrestricted designated net assets. The Trust agreement also states that restricted donations may be accepted for the Club. Restricted donations may be commingled with other assets of the Trust. There were no temporarily or permanently restricted Foundation net assets at December 31, 2017 and 2016.

The following are assets and net assets of the Foundation, which are included in the Combined Statements of Financial Position at December 31:

2017 2016Cash and cash equivalents 101,930$ 43,569$ Investments 1,180,774 1,113,651 Net assets, unrestricted, board designated 1,282,704$ 1,157,220$

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4) Investments – Endowment Trust – continued

Endowment investments consist of the following at December 31:

2017 2016

Common stocks 1,133,075$ 1,069,408$ Cash equivalents 101,930 43,569 Corporate bonds 25,860 26,002 Mutual funds 21,839 18,241

Net assets, unrestricted, board designated 1,282,704$ 1,157,220$

Endowment income consists of the following for the years ended December 31:

2017 2016Unrealized gains 72,532$ 128,492$ Interest and dividends 36,742 28,608 Realized gains 55,302 8,642

Total endowment income 164,576$ 165,742$

The Club’s endowment consists of investments established to support the purposes and objectives of the Club. As required by generally accepted accounting principles, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. The Board of Directors of the Foundation has interpreted the State Prudent Management of Institutional Funds Act (SPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Club classifies as unrestricted net assets (a) the original value of gifts donated to the endowment, (b) the original value of subsequent gifts to the endowment, and (c) accumulations to the endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. In accordance with SPMIFA, the Club considers the following factors in making a determination to appropriate or accumulate endowment funds: (1) the duration and preservation of the various

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4) Investments – Endowment Trust — continued

funds, (2) the purpose of the endowment funds, (3) general economic conditions, (4) the possible effect of inflation and deflation, (5) the expected total return from income and the appreciation of investments, (6) other resources of the Club, and (7) the Club’s investment policies. The Club has adopted investment and spending policies, approved by the Board of Directors, for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment funds while also maintaining the purchasing power of those endowment assets over the long-term. Accordingly, the investment process seeks to achieve an after-cost total real rate of return, including investment income as well as capital appreciation, which exceeds the annual distribution with acceptable levels of risk. Endowment assets are invested in a well-diversified asset mix, which includes stocks, bonds, certificate of deposits and cash equivalents, intended to result in a consistent inflation-protected rate of return that has sufficient liquidity to make required distributions, while growing the funds, if possible. Investment risk is measured in terms of the total endowment fund; investment assets and allocation between asset classes and strategies are managed to not expose the fund to unacceptable levels of risk.

Change in unrestricted designated endowment net assets as of December 31, is as follows:

2017 2016Endowment net assets, beginning of year 1,157,220$ 1,014,405$ Stock contributions 51,500 40,073 Realized gains 55,302 8,642 Interest and dividends 36,742 28,608 Net appreciation 72,532 128,492 Amounts appropriated for expenditure (90,592) (63,000) Endowment net assets, end of year 1,282,704$ 1,157,220$

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5) Endowment Fund

In addition to the endowment trust maintained by the Club’s Foundation, the Club has endowment funds that are held by the Albuquerque Community Foundation as a part of its pooled investments. The endowment assets have been classified as permanently restricted net assets.

These assets will be returned to the Club if the Albuquerque Community Foundation ceases to be a charitable organization. Investments are stated at fair value. Annual distributions can be made pursuant to the Albuquerque Community Foundation policy. Endowment net assets were valued at approximately $153,000 and $143,000 for the years ending December 31, 2017 and 2016, respectively.

Changes in endowment fund net assets as of December 31, 2017 are as follows:

Permanently TotalUnrestricted Restricted Endowment

Endowment net assets (deficit),beginning of year (15,718)$ 158,534$ 142,816$

Investment income 1,852 - 1,852 Net appreciation 16,916 - 16,916 Investment fees (2,522) - (2,522) Grants and other (5,823) - (5,823) Endowment net assets (deficit),

end of year (5,295)$ 158,534$ 153,239$

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5) Endowment fund – continued

Changes in endowment net assets as of December 31, 2016 are as follows: Permanently Total

Unrestricted Restricted Endowment

Endowment net assets (deficit),beginning of year (20,823)$ 158,534$ 137,711$

Investment income 1,296 - 1,296 Net appreciation 12,767 - 12,767 Amounts appropriated for expenditure (378) - (378) Investment fees (8,580) - (8,580) Endowment net assets (deficit),

end of year (15,718)$ 158,534$ 142,816$

6) Property, Furniture and Equipment

Property, furniture and equipment consists of the following at December 31:

2017 2016Buildings and improvements 1,278,935$ 1,173,250$ Equipment 368,943 363,228 Land 243,816 231,896 Vehicles 236,932 236,932 Construction in progress - 35,670

2,128,626 2,040,976 Less accumulated depreciation (1,211,838) (1,141,787)

Total 916,788$ 899,189$

7) Line of credit

The Club has a line of credit with a financial institution. The Club can take advances up to the amount of the trust investments. The agreement requires interest to be paid monthly to the financial institution at the London Interbank Offered Rate (LIBOR + 3.50%) of 3.67% at December 31, 2017 and 2016. The line of credit is secured by trust investments. At December 31, 2017 and 2016, borrowings on the line of credit were $565,564 and $434,400 respectively.

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8) Notes Payable

Notes payable consist of the following as of December 31,:

2017 2016

Note payable to a financial institution,due June 2024, monthly principal and interest payments of $529, interest at 4.25% 83,428$ -$

Note payable to a financial institution,due August 2019, monthly principal and interest payments of $3,374, interest at 4.99%, collateralized by two buses 36,493 56,978

Total notes payable 119,921 56,978 Less current portion (24,332) (20,485)

Long-term portion 95,589$ 36,493$

Future principal payments on this note as of December 31, 2017, are as follows:

24,332 17,886 3,043 3,185 3,326

68,149 119,921$

Year ending December 31,:2018201920202021

Thereafter2022

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9) Temporarily Restricted Net Assets

Temporarily restricted net assets are restricted for the following purposes at December 31:

2017 2016Comcast 73,898$ 57,272$ Technology Lab 33,633 22,000 Boys and Girls Club of America 25,166 - United Way Project Learn 17,865 - Time restricted pledge 15,000 - General Mills 10,000 - New York Life 10,000 - Wells Fargo 10,000 - Write Brain 10,000 - Other 7,789 9,290 Career Launch 5,000 - Fidelity Investments 5,000 - Money Matters 5,000 - United Way Encore Fellowship 1,324 43,908 Lowe's Renovation - 24,082 Best Buy - 6,056

Total 229,675$ 162,608$

10) Net Assets Released From Restrictions

Net assets released from restriction consist of the following for the years ended December 31:

2017 2016United Way Encore Fellowship 42,584$ -$ Lowe's Renovation 24,082 - Comcast 16,374 - Other 8,453 6,281 Best Buy 6,056 - Technology Lab 3,367 30,019 PNM-Reduce Your Use - 5,000 Garfield Site - 4,735

Total 100,916$ 46,035$

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11) Special Events

All fundraising activities that generate revenue for the Club, and are not designated to a specific program, are classified as special events. These revenues are presented net of the corresponding direct expenses in the financial statements. Below are summaries of the special events for each year:

For the year ended December 31, 2017:

Revenues Direct costs NetGolf Tournament 151,512$ 15,894$ 135,618$ Gala 223,202 118,063 105,139 Montezuma Ball 296,666 145,134 151,532 Pulling for Kids 18,291 5,886 12,405

Total 689,671$ 284,977$ 404,694$

For the year ended December 31, 2016:

Revenues Direct costs NetGolf Tournament 163,316$ 15,331$ 147,985$ Gala 308,917 199,583 109,334 Pulling for Kids 60,973 50,029 10,944

Total 533,206$ 264,943$ 268,263$ 12) Fair Value Measurement

FASB Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, provides a definition of fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted process in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The Club only has investments with Level 1 and 2 measurements.

Level 1 Fair Value Measurements – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Club has the ability to access.

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12) Fair Value Measurements – continued

Level 2 Fair Value Measurements – The fair value of investments is based on quoted prices for similar assets in an active market, quoted prices for similar assets in inactive markets, inputs other than quoted prices that are observable for the assets, or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2017 and 2016.

Common stocks and corporate bonds are valued at the closing price as reported on the active market on which the individual securities are traded.

Mutual funds are valued at the net asset value of shares held by the Club at year end.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Club management believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The table below segregates all financial assets and liabilities as of December 31, 2017 and 2016 that are measured at fair value on a recurring basis (at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

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Quoted Prices

In Active SignificantMarkets for Other

Identical ObservableAssets Inputs

Fair Value (Level 1) (Level 2)December 31, 2017Mutual funds:

Growth funds 21,839$ 21,839$ -$ Total mutual funds 21,839 21,839 -

Corporate Bonds:BBB- Credit Rating 25,860 25,860 -

Total corporate bonds 25,860 25,860 -

Common Stock:Energy 79,682 79,682 - Financial services 197,618 197,618 - Healthcare 180,966 180,966 - Manufacturing 485,332 485,332 - Natural resources 39,052 39,052 - Telecommunications 110,973 110,973 - Technology 4,145 4,145 - Chemistry 2,314 2,314 - Retailer/Wholesale 2,339 2,339 - Transportation 30,654 30,654 -

Total common stock 1,133,075 1,133,075 -

Other:Cash equivalents 101,930 - 101,930

Total other 101,930 - 101,930

Sub total 1,282,704 1,180,774 101,930 Endowment Fund 153,239 - 153,239

Total 1,435,943$ 1,180,774$ 255,169$

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Quoted Prices In Active Significant

Markets for OtherIdentical ObservableAssets Inputs

Fair Value (Level 1) (Level 2)December 31, 2016Mutual funds:

Growth funds 18,241$ 18,241$ -$ Total mutual funds 18,241 18,241 -

Corporate Bonds:BB+ Credit Rating 26,002 26,002 -

Total corporate bonds 26,002 26,002 -

Common Stock:Energy 125,861 125,861 - Financial services 174,201 174,201 - Healthcare 136,774 136,774 - Manufacturing 452,614 452,614 - Natural resources 39,636 39,636 - Telecommunications 107,303 107,303 - Technology 3,316 3,316 - Chemistry 176 176 - Retail/Wholesale 1,063 1,063 - Transportation 28,464 28,464 -

Total common stock 1,069,408 1,069,408 -

Other:Cash equivalents 43,569 - 43,569

Total other 43,569 - 43,569

Sub total 1,157,220 1,113,651 43,569 Endowment Fund 142,816 - 142,816

Total 1,300,036$ 1,113,651$ 186,385$

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13) Subsequent Event

The Club has been named as a beneficiary to the O. Douglas Schumann and Mary Elizabeth Schumann Trust. According to the trust agreement, the Club is to receive a portion of trust funds upon the passing of O. Douglas Schumann, the Trustee. The agreement also requires that funds received be placed in an endowment. The gift is restricted solely for the purpose of serving the young people in Rio Rancho, New Mexico. As of December 31, 2017, the Club has not collected these funds as the amount to be paid to the Club is undetermined. Currently, the Club is working with the successor trustee to obtain the funds. However, as the contribution and receivable are not able to be determined the asset and revenue have not been recorded.

14) Contingent Liabilities

Through the normal course of business, the Club may become involved in litigation. While the outcome of the litigation is unknown and the liability cannot be reasonably estimated. The Club believes the liability is adequately covered by its insurance. Further, management believes that the outcome of the litigation will not have a material impact on its financial position.

15) Recently Issued Accounting Pronouncements

The following accounting pronouncements have been issued but have not yet been implemented by the Club.

Revenue Recognition In May 2014, the FASB issued ASC 606 – Revenue from Contracts with Customers. ASC 606 is a single principle-based revenue standard for U.S. GAAP and IFRS (International Financial Reporting Standards) that replaces almost all U.S. GAAP and IFRS guidance for revenue recognition. The pronouncement is effective for fiscal years beginning after December 15, 2018 (the Club’s fiscal year ending December 31, 2019).

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15) Recently Issued Accounting Pronouncements – continued

New Not-for-Profit Reporting Framework In August 2016, the FASB issued Accounting Standards Update (ASU) 2016-14 – Not-for-Profit Entities (Topic 958): Presentation of Financial Statements for Not-for-Profit Entities. ASU 2016-14 is intended to improve the current net asset classification requirements and the information presented in financial statements and notes about a not-for-profit entity’s liquidity, financial performance and cash flows. The main provisions of the ASU require a not-for-profit entity to:

♦ Present on the face of the statement of financial position amounts for two classes of net assets at the end of the period, rather than for the currently required three classes. That is, a not-for-profit entity will report amounts for net assets with donor restrictions and net assets without donor restrictions, as well as the currently required amount for total net assets.

♦ Present on the face of the statement of activities the amount of the change in each of the two classes of net assets (noted above) rather than the currently required three classes. Not-for-profit entities would continue to report the currently required amount of the change in total net assets for the period.

♦ Continue to present on the face of the statement of cash flows the net amount for operating cash flows using either the direct or indirect method of reporting, but no longer require the presentation or disclosure of the indirect method (reconciliation) if using the direct method.

The ASU also provides for enhanced disclosures regarding the following:

♦ Amounts and purposes of governing board designations, appropriations, and similar actions that result in self-imposed limits in the use of resources without donor-imposed restrictions as of the end of the period.

♦ Composition of net assets with donor restrictions at the end of the period and how the restrictions affect the use of resources.

♦ Qualitative information that communicates how a not-for-profit entity manages its liquid resources available to meet cash needs for general expenditures within one year of the balance sheet date.

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15) Recently Issued Accounting Pronouncements – continued

♦ Quantitative information, either on the face of the statement of financial position or in the notes, and additional qualitative information in the notes as necessary, that communicates the availability of a not-for-profit entity’s financial assets at the balance sheet date to meet cash needs for general expenditures within one year of the balance sheet date. Availability of a financial asset may be affected by (1) its nature, (2) external limits imposed by donors, grantors, laws, and contracts with others, and (3) internal limits imposed by governing board decisions.

♦ Amounts of expenses by both their natural classification and their functional classification. That analysis of expenses is to be provided in one location, which could be on the face of the statement of activities, as a separate statement, or in notes to the financial statements.

♦ Method(s) used to allocate costs among program and support functions. ♦ Underwater endowment funds, which include required disclosures of (1) an

NFP’s policy, and any actions taken during the period, concerning appropriation from underwater endowment funds, (2) the aggregate fair value of such funds, (3) the aggregate of the original gift amounts (or level required by donor or law) to be maintained, and (4) the aggregate amount by which funds are underwater (deficiencies), which are to be classified as part of net assets with donor restrictions.

The ASU is effective for fiscal years beginning after December 15, 2017 (the Club’s fiscal year ending December 31, 2018). Leases On February 25, 2016, the FASB issued ASU 2016-02 Leases, which significantly changes the accounting for leases in the financial statements of lessees and supersedes FASB ASC Topic 840. With this update, U.S. GAAP now will require lessees under operating leases to recognize a liability in the statement of financial position, a liability to make lease payments (the lease liability), and an asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting election not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. Cash flows related to operating leases will continue to be reported within operating activities on the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2019 (the Club’s fiscal year ending December 31, 2020). As of the date of these financial statements, management has not determined the impact these new accounting pronouncements will have on future reporting.+

(505) 293-5009 • Fax (505) 293-3597 • 4811 Hardware Drive NE, Suite E-4 • Albuquerque, New Mexico 87109

www.loftisgroup.net 28

Independent Auditors’ Report on Internal Control Over Financial Reporting and On Compliance and Other Matters Based on an Audit of

Financial Statements Performed in Accordance with Government Auditing Standards

Board of Directors Boys & Girls Clubs of Central New Mexico

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Boys & Girls Clubs of Central New Mexico (the “Club”) (a nonprofit organization), which comprise the combined statement of financial position as of December 31, 2017, and the related combined statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated May 29, 2018.

Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Club’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstance for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Club’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Club’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

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Compliance and Other Matters As part of obtaining reasonable assurance about whether the Club’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Governmental Auditing Standards.

Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Club’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Club’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

May 29, 2018 Albuquerque, New Mexico

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Boys & Girls Clubs of Central New Mexico Schedule of Findings

For the Year Ended December 31, 2017 None.

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